Bill would guard against flipping

Mikulski, others discuss task force's new report

October 01, 2002|By Tom Pelton | Tom Pelton,SUN STAFF

U.S. Sen. Barbara A. Mikulski said yesterday that she hopes to introduce legislation this fall to help further protect homebuyers from being "gouged, ripped off and scammed," by real estate flipping.

Flipping is a practice in which real estate speculators buy and then rapidly sell homes for wildly inflated prices using false promises and fraudulent appraisals.

As a result, naive first-time homebuyers are saddled with more debt than they can afford, which leads to foreclosures and bankruptcies.

"People are getting mugged," Mikulski said at a meeting of housing officials and activists in City Hall. "But a mugging will get your pocketbook for only one day. Flipping will get your pocketbook for a lifetime."

Mikulski, U.S. Sen. Paul S. Sarbanes, Rep. Elijah E. Cummings and more than 20 other government and real estate industry leaders discussed a new report of the Baltimore City Flipping and Predatory Lending Task Force.

The report noted a 33 percent decline in flipping in the city and the federal prosecution of 50 people charged in mortgage fraud or flipping scams, said Baltimore Housing Commissioner Paul T. Graziano.

But the coordinator of the task force, Kenneth J. Strong, director of research and policy at the Community Law Center, said the U.S. Department of Housing and Urban Development needs to do more to prevent the sale to speculators of homes that HUD has taken possession of through foreclosure on federal loans.

HUD sells homes to investors with long records of property flipping, people who have pleaded guilty to mortgage fraud and companies not registered to do business in the state, Strong said.

As a result, Strong said, those homes often are used as vehicles for real estate scams. Strong and others at yesterday's meeting called for reforms of HUD rules so that homes in possession of the agency are sold or donated to responsible nonprofit organizations, well-established developers or owners who intend to live in the houses, not rent them out as investments.

Laurie Maggiano, director of asset management and disposition for HUD, said the agency has taken several steps to discourage flipping and plans to do more, including better screening of those buying HUD homes.

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